One of the key issues involved in a divorce is dividing marital property. Property division can be straightforward when the spouses agree what property is marital and subject to division and how those marital assets should be divided. However, when spouses cannot agree on how to divide marital assets, a divorce proceeding can become very complex. An asset that is often the source of a dispute during a divorce is an interest in a business. Contact an Illinois family law attorney to discuss options for protecting an interest in a business if you are contemplating separating from your spouse.
The first step is to determine whether the business is a marital asset. Non-marital assets are not subject to property division in Illinois. If the property was acquired during the marriage, the law presumes that it is marital property. However, that presumption can be overcome in some cases. For example, most inheritances and gifts are presumed to be non-marital property. However, if the spouse commingles inherited or gifted property or uses it for the family, the property could be converted to marital property.
Because a business is often a large asset, it is important to work with an experienced Illinois family law attorney to protect your best interest. In addition, you must keep in mind that Illinois is an equitable property division state; equitable does not necessarily mean that assets are divided equally. Therefore, one spouse may receive a higher percentage of the business depending on the circumstances in the case.
If the business is considered marital property, you must determine the worth of the business before you can proceed to divide the asset. In some cases, the parties can agree to the valuation of the business. However, if the parties cannot agree as to the value of the business, each party may need to retain business valuation experts to determine the value the business.
If the business is a marital asset, there are several ways the parties can divide this asset.
If the spouses are amicable, they might want to continue operating the business together, especially if that arrangement would be more profitable for both parties. However, co-ownership is not very popular because many couples find it very difficult to work with each other day after day as they watch each other go on with their lives, including dating other people. If the parties insist on co-ownership, the agreement should be very specific regarding the duties and responsibilities of each party and actions that the parties are prohibited from taking without consulting the other party.
After the value of the business is determined and the judge determines the ownership interest for each spouse, one spouse may buy out the other spouse by paying the selling spouse for his or her interest in the business. This type of property division works for many couples provided one spouse has access to enough cash to buy out the other spouse. When there are insufficient liquid assets for a buyout, non-liquid assets are often utilized.
If the above two methods are not feasible, the parties may need to sell the business to a third party. A judge may order the sale if the parties are in a volatile relationship and neither spouse has a source of cash or off-setting assets to pay the other spouse in a buyout. This method of dividing the business is efficient and works well except in cases in which the business is not profitable or is a niche business that no longer attracts customers.
Call Our Illinois Family Law Attorneys for More Information
If you have questions about property division in a divorce case, including dividing a business, contact our Illinois family law attorneys at the Goodman Law Firm today for more information and guidance.
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